On 15th January the UK’s Supreme Court handed down its judgment for the COVID-19 business interruption insurance test case between the Financial Conduct Authority and a group initially consisting of eight insurers.

The Supreme Court found resoundingly in favour of the FCA and BI policyholders it represented, dismissed the insurers’ remaining appeals and allowed all four of the FCA’s appeals, in two cases on a qualified basis.

The effect is that the insuring clauses which were in issue on the appeal will provide cover for the BI caused by COVID-19. However, many policies only have cover which focuses on property damage and consequently will still be unable to claim under their insurance.

The BI test case has made national headlines during the pandemic, and the way in which the FCA has worked in favour of policyholders’ interests throughout, particularly in its efforts towards clear and effective communication, is deserving of credit for a job well done.

On 3rd March the regulator released its final guidance, setting out the types of evidence and methodologies for policyholders to use when proving the presence of COVID-19 around their premises.

The document is designed to provide clarity for all parties involved in BI insurance, the regulator noted, primarily for policyholders, but also brokers and intermediaries, and insurers themselves, including managing agents at Lloyd’s.

The guidance was put together after consultation and follows the FCA’s release on 29th January of a policy checker designed to help identify whether a policy would cover a COVID-19 BI claim, as well as a document answering policyholders’ FAQs published at the same time.

In addition, the FCA will shortly publish a COVID-19 calculator to assist policyholders in carrying out the calculations in Chapters 7, 8 and 9 of the final guidance – on reported cases of the virus, on estimated cases, and geographical distribution methodology, respectively.

In bringing the test case, the FCA emphasised its aim was to urgently clarify key issues of contractual uncertainty for as many policyholders and insurers as possible. Initially the regulator did this by selecting a representative sample of 21 types of policy, issued by eight insurers, for its test case.

The test case was designed with the policies of smaller businesses in mind, with BI coverage through property damage, disease and prevention of access clauses.

Some 370,000 policyholders were identified as holding 700 types of policies, issued by 60 insurers, that may be affected by the outcome of the test case.

The latest communication updates are in line with the regulator’s continued aim to provide clarity to policyholders. The policy checker, FAQ and the final guidance are valuable aids to commercial policyholders still wondering where they stand after the Supreme Court’s ruling.

Throughout the process the FCA has done what it said it would, when it would, communicated clearly and effectively, and kept policyholders’ interests at heart.

At Airmic, we commend the FCA for a job well done in this case, and strongly recommend policyholders sign up for the FCA’s BI test case email alerts and make the most of the useful resources provided by the regulator.

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